The formula that is usually used by lenders to determine interest rates for a loan is:

However, then comes a pandemic, and the economy takes a dive, and while that formula of how you may receive a low interest rate for a loan still is true, there become other factors that get melded into it all.

Now bank’s reduce the rate they pay interest on our savings. Which means, while saving money is still a good idea, it is no longer an investment. There are other places to “park” our money for a while that will make us more money. As investing money is in the end, to have our money make us money.

Make our money work for us.

What is an Offset Mortgage?

Simply put, an offset mortgage is where we use what savings we have to “offset” the balance of our mortgage on our property.

An example is this:

You have a mortgage on your property of £150,000, and are paying an interest rate of 4%.

You have £20,000 in savings.

By offsetting the £20,000 of savings towards your mortgage, you only pay interest on £130,000, which can save you hundreds of Pounds a year. In addition, if you have to pay taxes on your savings, it can save you even more.

Which means not only do you save money, but you can pay off your mortgage at a quicker rate.

Offset mortgages are becoming more popular, especially as interest rates on savings account have been lowered.

Just another way to have your money work for you.

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